EXHIBIT 99.4
DATED: FEBRUARY 12, 2003
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO
THE COMPANY.
No. 001 $1,560,000
PRESIDION SOLUTIONS, INC. and MEDIABUS NETWORKS, INC.
6.5% SECURED CONVERTIBLE DEBENTURE
DUE FEBRUARY 12, 2004
THIS DEBENTURE is issued jointly and severally by Presidion Solutions, Inc., a
Florida Corporation (the "Company"), and MediaBus Networks, Inc., a Florida
Corporation (the "Parent" and, with the Company, the "Obligors"). The Company is
a wholly-owned subsidiary of the Parent. This Debenture is designated as the
Obligors' 6.5% Secured Convertible Debenture, due February 12, 2004, in the
aggregate principal amount of One Million Five Hundred Sixty Thousand Dollars
($1,560,000) (the "Debenture").
FOR VALUE RECEIVED, the Company and the Parent, jointly and severally, promise
to pay to MERCATOR FOCUS FUND, L.P., a California limited partnership, or its
registered assigns (the "Holder"), the principal sum of $1,560,000 on February
12, 2004 or such earlier date as the Debenture is required or permitted to be
repaid as provided hereunder (the "Maturity Date") and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 6.5% per annum, with interest accruing commencing
on the date hereof and payable on the first business day of each month while the
Debenture remains outstanding (each an "Interest Payment Date"). The above
notwithstanding, the Debenture shall become due and immediately payable,
including all accrued but unpaid interest upon the closing of a Funding Event
(as defined in Section 5).
Subject to the terms and conditions herein, the Holder may elect to receive
interest hereunder in shares of the common stock of the Parent, $0.0000303 par
value per share (the "Common Stock") or cash. If interest is paid by the Company
in shares of its Common Stock, then the number of shares of Common Stock
issuable on account of such interest shall equal the cash amount of such
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interest on such Interest Payment Date divided by the Conversion Price (as
defined below) on such date. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date (as
defined in Section 5) until payment in full of the principal sum, together with
all accrued and unpaid interest and other amounts, which may become due
hereunder, has been made. Interest hereunder will be paid to the Person (as
defined in Section 5) in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of Debentures (the
"Debenture Register"). All overdue accrued and unpaid interest to be paid in
cash hereunder shall entail a late fee at the rate of 10% per annum ("Late Fee")
(or such lower maximum amount of interest permitted to be charged under
applicable law) which will accrue daily, from the date such interest is due
hereunder through and including the date of payment, payable in cash or, at the
option of the Holder, in shares of Common Stock. If such Late Fee is paid by the
Company in shares of its Common Stock, then the number of shares of Common Stock
issuable on account of such Late Fee shall equal the cash amount of such Late
Fee on such Late Fee payment date divided by the Conversion Price on such date.
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange. The Company shall have the
ability to redeem this Debenture pursuant to the terms of that certain Letter
Agreement dated as of the date hereof.
SECTION 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 5) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Obligors and any agent of either Obligor may
treat the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company, the Parent nor any such
agent shall be affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) An "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest
(including any Late Fees) on or liquidated damages in respect of the Debenture,
free of any claim of subordination, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by acceleration or
otherwise) which is not cured within thirty (30) days after the date the payment
became due and payable;
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(ii) the Parent shall fail to file the Underlying Shares
Registration Statement with the Commission within sixty (60) days of the
Original Issue Date;
(iii) the Company or the Parent shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit any
breach of any of the Transaction Documents (as defined in Section 5), and such
failure or breach shall not have been remedied within ten (10) days after the
date on which notice of such failure or breach shall have been given;
(iv) the Company or the Parent shall commence, or there shall be
commenced against the Company or the Parent's case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or the Parent commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or the Parent or there is commenced
against the Company or the Parent any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 61 days; or the Company or
the Parent is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company or the
Parent suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 61 days; or the Company or the Parent makes a general assignment for
the benefit of creditors; or the Company or the Parent shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or the Parent shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Company or the Parent shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or the Parent for the purpose of effecting any of the foregoing;
(v) the Company or the Parent shall default in any of its
obligations under any other debenture or any mortgage, credit agreement or other
facility, (which default is not waived or otherwise acquiesced to in writing
within thirty (30) days of written notice of such default), indenture agreement,
factoring agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement of the Company or
the Parent in an amount exceeding $100,000, whether such indebtedness now exists
or shall hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable;
(vi) the Common Stock shall cease to be quoted for trading or
listed for trading on the National Association of Securities Dealers OTC
Bulletin Board ("OTC"), Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a "Subsequent
Market") and shall not again be quoted or listed for trading thereon within five
(5) Trading Days;
(vii) the Company or the Parent shall be a party to any Change of
Control Transaction (as defined in Section 5);
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(viii) an Underlying Shares Registration Statement (as defined in
Section 5) shall not have been declared effective by the Commission (as defined
in Section 5) on or prior to the one hundred fiftieth (150th) day after the
Original Issue Date. The Company and the Parent shall each use their best
efforts and all available resources to have the Underlying Shares Registration
Statement declared effective by the Commission on or prior to the one hundred
twentieth (120th) day after the Original Issue Date;
(ix) if, during the Effectiveness Period (as defined in the
Registration Rights Agreement (as defined in Section 5)), the effectiveness of
the Underlying Shares Registration Statement lapses for any reason or the Holder
shall not be permitted to resell Registrable Securities (as defined in the
Registration Rights Agreement) under the Underlying Shares Registration
Statement, in either case, for more than five (5) consecutive Trading Days or an
aggregate of eight Trading Days (which need not be consecutive Trading Days);
(x) an Event (as defined in the Registration Rights Agreement)
shall not have been cured to the satisfaction of the Holder prior to the
expiration of thirty (30) days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other than an Event resulting
from a failure of the Underlying Shares Registration Statement to be declared
effective by the Commission on or, prior to the one hundred fiftieth (150th) day
after the Original Issue Date, which shall be covered by Section 3(a)(viii);
(xi) the Company shall fail for any reason to deliver Common Stock
certificates to a Holder prior to the third Trading Day after a Conversion Date
pursuant to and in accordance with Section 4(b) or the Company or the Parent
shall provide notice to the Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for conversions of the
Debenture in accordance with the terms hereof;
(xii) the Company shall fail for any reason to deliver the payment
in cash pursuant to a Buy-In (as defined herein) within three (3) days after
notice is claimed delivered hereunder;
(xiii) the Company shall fail for any reason to cause the number of
authorized but unissued shares of its Common Stock to be increased to an amount
sufficient to enable the Company to comply with the reserve requirement of
Section 4(c)(vi) for a period of sixty (60) days following its receipt of any
Holder's notice under Section 4(c)(vi) that such reserve is not being satisfied
if, at the time of the notice, the number of authorized shares of the Company's
Common Stock is insufficient for this purpose;
(xiv) the Parent shall fail to file when due any annual or quarterly
report required to be filed with the Commission or any other report or filing
required to be filed with any regulatory agency; or
(xv) the Parent shall fail to have completed by April 15, 2003 its
financial statements (prepared on a consolidated basis with Presidion) for the
year ended December 31, 2002, and to have received an unqualified report thereon
from Ernst & Young, LLP.
(b) During the time that any portion of this Debenture is outstanding, if
any Event of Default occurs and is continuing, the full principal amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
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the date of acceleration shall become at the Holder's election, immediately due
and payable in cash, provided however, that if the Company informs the Holder
that it will be unable to pay the amounts due in cash, the Holder may request
payment of such amounts in Common Stock of the Parent. If an Event of Default
occurs and remains uncured, the percentage used in Section 4(c)(i)(y) to
calculate the price at which the Debenture may be converted into shares of
Common Stock shall be reduced from eighty-five percent (85%) to seventy-five
percent (75%) thirty (30) days after the occurrence of the Event of Default.
Such percentage shall remain at seventy-five percent (75%) until the Event of
Default is cured. The Holder need not provide and the Company and the Parent
hereby waive any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Holder at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
SECTION 4. CONVERSION.
(a) (i) CONVERSION AT OPTION OF HOLDER.
(A) The principal balance outstanding under this Debenture shall
be convertible into shares of Common Stock at the option of the Holder, in whole
or in part at any time and from time to time, after the Original Issue Date
(subject to the limitations on conversion set forth in Section 4(a)(ii) hereof).
The number of shares of Common Stock issuable upon a conversion under the
preceding sentence equals the quotient obtained by dividing (x) the outstanding
principal amount of this Debenture to be converted by (y) the Conversion Price
(as defined in Section 4(c)(i)). Additionally (subject to the limitations on
conversion set forth in Section 4(a)(ii) hereof), at the option of the Holder,
all accrued and unpaid interest on the Debenture shall be convertible into
Common Stock. The number of shares of Common Stock issuable upon a conversion
under the preceding sentence equals the quotient obtained by dividing (x) all
accrued and unpaid interest on the Debenture to be converted by (y) the
Conversion Price (as defined in Section 4(c)(i)).
(B) Notwithstanding anything to the contrary contained herein, if
on any Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in shares of Common
Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a Subsequent Market; (3) the Company or the Parent has failed to timely satisfy
its conversion; or (4) the issuance of such shares of Common Stock would result
in a violation of Section 4(a)(ii), then, at the option of the Holder, the
Company or the Parent, in lieu of delivering shares of Common Stock pursuant to
Section 4(a)(i), shall deliver, within three (3) Trading Days of each applicable
Conversion Date, an amount in cash equal to the product of the outstanding
principal amount of the Debentures to be converted plus any interest due therein
divided by the Conversion Price and multiplied by the highest closing price of
the stock from date of the conversion notice till the date that such cash
payment is made.
(C) The Holder shall effect conversions by simultaneously
delivering to the Company and the Parent a completed notice in the form attached
hereto as Exhibit A (a "Conversion Notice"), including a completed Conversion
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Schedule in the form of Schedule I to the Conversion Notice (on each Conversion
Date, the "Conversion Schedule"). The Conversion Schedule shall set forth the
remaining principal amount of this Debenture and all accrued and unpaid interest
thereon subsequent to the conversion at issue. The date on which a Conversion
Notice is delivered is the "Conversion Date." Unless the Holder is converting
the entire principal amount outstanding under this Debenture, the Holder is not
be required to physically surrender this Debenture to the Parent in order to
effect conversions. Subject to Section 4(b), each Conversion Notice, once given,
shall be irrevocable. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Debenture plus all accrued and unpaid
interest thereon in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule. The Holder and the
Company or the Parent shall maintain records showing the principal amount
converted and the date of such conversions. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and determinative in
the absence of manifest error.
(ii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert the Debenture or receive
shares of Common Stock as payment of interest hereunder to the extent such
conversion or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debenture held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company or the
Parent the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of the
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of the Debenture that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company and the Parent shall notify the Holder
of this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with the periods
described in Section 4(b) and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 65 days prior notice to
the Company and the Parent. Other Holders shall be unaffected by any such
waiver.
(b) (i) On the Original Issue Date, the Parent shall deliver to the
Parent's transfer agent corporate issuance resolutions with respect to the
issuance of Common Stock pursuant to the terms of the Debenture.
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(ii) Nothing herein shall limit a Holder's right to pursue actual
damages or declare an Event of Default pursuant to Section 3 herein for the
Parent's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company or the Parent shall not have delivered any cash due in
respect of conversion of the Debenture or as payment of interest thereon by the
fifth (5th) Trading Day after the Conversion Date, the Holder may, by notice to
the Company and the Parent, require the Parent to issue shares of Common Stock
pursuant to Section 4(c), except that for such purpose the Conversion Price
applicable thereto shall be the lesser of the Conversion Price on the Conversion
Date and the Conversion Price on the date of such Holder demand. Any such shares
will be subject to the provisions of this Section.
(iii) In addition to any other rights available to the Holder, if
the Company or the Parent fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the fifth (5th) Trading Day after
the Conversion Date, and if after such fifth (5th) Trading Day the Holder
purchases (in an open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by such Holder of the Underlying Shares which the
Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company
and the Parent shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion at
issue multiplied by (2) the market price of the Common Stock at the time of the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue a Debenture in the principal amount equal to the
principal amount of the attempted conversion or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company and the
Parent timely complied with its delivery requirements. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of Debentures with respect to
which the market price of the Underlying Shares on the date of conversion was a
total of $10,000 under clause (A) of the immediately preceding sentence, the
Company and the Parent shall be required to pay the Holder $1,000. The Holder
shall provide the Company and the Parent written notice indicating the amounts
payable to the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the Company and the
Parent to make payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company and the Parent timely pay in full such
payment, neither the Company or the Parent shall be required to pay such Holder
liquidated damages under Section 4(b)(ii) in respect of the certificates
resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in effect on any
Conversion Date shall be the lower of (x) $0.34 or (y) 85% of the average of the
lowest three inter-day trading prices (which need not occur on consecutive
Trading Days) during the twenty (20) Trading Days immediately preceding the
applicable Conversion Date (which may not include Trading Days prior to the
Original Issue Date), provided, that such twenty (20) Trading Day period shall
be extended for the number of Trading Days during such period in which (A)
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trading in the Common Stock is suspended by, or not traded on, the OTC or a
Subsequent Market on which the Common Stock is then listed, or (B) after the
date, the Underlying Shares Registration Statement is declared effective by the
Commission, the Prospectus included in the Underlying Shares Registration
Statement may not be used by the Holder for the resale of Underlying Shares.
(ii) If the Parent, at any time while the Debenture is outstanding
shall (a) pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent
securities payable in shares of Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then the Initial Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Parent, at any time while the Debenture is outstanding,
shall issue rights, options or warrants to all holders of Common Stock (and not
to the Holder) entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value at the record
date mentioned below, then the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants (plus the number of additional shares of Common Stock
offered for subscription or purchase), and of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants, plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such night, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.
(iv) If the Parent or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while the
Debenture is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
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exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling
any Person to acquire shares of Common Stock, at a price per share less than the
Conversion Price (if the holder of the Common Stock or Common Stock Equivalent
so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at a price per
share which is less than the Conversion Price, such issuance shall be deemed to
have occurred for less than the Conversion Price), then, at the sole option of
the Holder, the Conversion Price shall be adjusted to mirror the conversion,
exchange or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Parent
shall notify the Holder and the Escrow Agent in writing, no later than the
business day following the issuance of any Common Stock or Common Stock
Equivalent subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms. No adjustment under this Section shall be made as a result of
issuances and exercises of options to purchase shares of Common Stock issued for
compensatory purposes pursuant to any of the Parent's stock option or stock
purchase plans.
(v) If the Parent, at any time while the Debenture is outstanding,
shall distribute to all holders of Common Stock (and not to the Holder)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security, then in each such case the Conversion Price at which
the Debenture shall thereafter be convertible shall be determined by multiplying
the Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right thereafter
to, at its option, (A) convert the then outstanding principal amount, together
with all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Debenture only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the Holder of the
Debenture shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Parent
into which the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture could have been converted immediately prior to such reclassification
or share exchange would have been entitled, or (B) require the Parent and the
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Company to prepay the outstanding principal amount of the Debenture, plus all
interest and other amounts due and payable thereon, at a price determined in
accordance with Section 3(b). The entire prepayment price shall be paid in cash.
This provision shall similarly apply to successive reclassifications or share
exchanges.
(vii) The Parent shall maintain a share reserve of not less than
200% of the shares of Common Stock issuable upon conversion of the Debenture;
and within three (3) Business Days following the receipt by the Parent of a
Holder's notice that such minimum number of Underlying Shares is not so
reserved, the Parent shall if there are sufficient authorized but unissued
shares promptly reserve a sufficient number of shares of Common Stock to comply
with such requirement. If there are not sufficient authorized but unissued
shares, the Parent shall use its best efforts to call a special shareholders'
meeting within sixty (60) days of such notice to increase the number of
authorized shares of Common Stock.
(viii) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. No
adjustments in either the Conversion Price or the Initial Conversion Price shall
be required if such adjustment is less than $0.01, provided, however, that any
adjustments which by reason of this Section are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(ix) Whenever either the Initial Conversion Price or the Conversion
Price is adjusted pursuant to any of Section 4(c)(ii) - (v), the Parent shall
promptly mail to the Holder a notice setting forth the Initial Conversion Price
or Conversion Price (as applicable) after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
(x) If (A) the Parent shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Parent shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Parent shall authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights; (D) the approval of any stockholders of the Parent shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Parent or the Company is a party, any sale
or transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Parent or the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Parent or the Company; then, in each case, the Parent shall cause to be
filed at each office or agency maintained for the purpose of conversion of the
Debenture, and shall cause to be mailed to the Holder at its last address as it
shall appear upon the stock books of the Parent, at least twenty (20) calendar
days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange,
provided, that the failure to mail such notice or any defect therein or in the
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mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice. The Holder is entitled to convert the Debenture
during the twenty (20) day calendar period commencing the date of such notice to
the effective date of the event triggering such notice.
(xi) In case of any (1) merger or consolidation of the Parent or
the Company with or into another Person, or (2) sale by the Parent or the
Company of more than one-half (1/2) of the assets of the Parent or the Company
in one or a series of related transactions, a Holder shall have the right to (A)
exercise any rights under Section 3(b), (B) convert the aggregate principal
amount of the Debenture then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of the Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, require the surviving
entity to issue to the Holder a convertible debenture with a principal amount
equal to the aggregate principal amount of the Debenture then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible debenture shall have terms identical
(including with respect to conversion) to the terms of this Debenture, and shall
be entitled to all of the rights and privileges of the Holder of the Debenture
set forth herein and the agreements pursuant to which the Debentures were
issued. In the case of clause (C), the conversion price applicable for the newly
issued shares of convertible preferred stock or convertible debentures shall be
based upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale or consolidation shall include such terms so as
to continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
(d) The Parent covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Debenture and payment of interest
on the Debenture, each as herein provided, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holder, not
less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Parent as to reservation of such shares set forth
in the Debenture) be issuable (taking into account the adjustments and
restrictions of Section 4(b)) upon the conversion of the outstanding principal
amount of the Debenture and payment of interest hereunder. The Parent covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable and, if the
Underlying Shares Registration Statement has been declared effective under the
Securities Act, registered for public sale in accordance with such Underlying
Shares Registration Statement.
(e) Upon a conversion hereunder the Parent shall not be required to issue
stock certificates representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any final fraction of
a share based on the Per Share Market Value at such time. If the Parent elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
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receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debenture shall be made without charge to the Holder thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Parent shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such Debenture so converted and the Parent
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Parent
the amount of such tax or shall have established to the satisfaction of the
Parent that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Parent and the Company, at
753 W. Big Beaver, Suite 1700, Troy, Michigan 48084, or such other address or
facsimile number as the Parent may specify for such purposes by notice to the
Holder delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Parent or the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four (4) days after deposit in the United States mail, (iv) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
SECTION 5. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Change of Control Transaction" means the occurrence of (a) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company
or the Parent, by contract or otherwise) of in excess of 33% of the voting
securities of the Company or the Parent, (b) a replacement at one time or over
time of more than one-half of the members of the board of directors of either
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the Company or the Parent which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date hereof), (c)
the merger, consolidation or sale of 50% or more of the assets of the Company or
the Parent in one or a series of related transactions with or into another
entity, or (d) the execution by the Company or the Parent of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (a), (b) or (c).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.0000303 par value per share, of
the Parent and stock of any other class into which such shares may hereafter be
changed or reclassified.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funding Event" means any transaction or series of transactions closed
after the Original Issue Date in which the Company or the Parent, or both
collectively, raise $4,000,000 or more gross through the sale of their equity
securities.
"Original Issue Date" shall mean the date of the first issuance of the
Debenture regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
"Per Share Market Value" means the price per share in the last reported
trade of the Common Stock on the OTC or on a Subsequent on which the Common
Stock is then listed.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Purchase Agreement" means that purchase agreement, dated February __, 2003
to which the Company, the Parent and the original Holder are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Original Issue Date, to which the Company and the Parent and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" means a day on which the shares of Common Stock are quoted on
the OTC or quoted or traded on such Subsequent Market on which the shares of
Common Stock are then quoted or listed; provided, that in the event that the
shares of Common Stock are not listed or quoted, then Trading Day shall mean a
Business Day.
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"Transaction Documents" shall have the meaning set forth in the Purchase
Agreement.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debenture or as payment of interest in accordance with the
terms hereof.
"Underlying Shares Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a "selling stockholder" thereunder.
SECTION 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligations of the Company and the Parent,
which are absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture is a direct
obligation of the Company and the Parent. This Debenture ranks pari passu with
all other Debentures now or hereafter issued under the terms set forth herein.
As long as the Debenture is outstanding, the Company and the Parent shall not
and shall cause their subsidiaries not to, without the consent of the Holder,
(i) amend its certificate of incorporation, bylaws or other charter documents so
as to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
to repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.
SECTION 7. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Parent or the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Parent or the Company, unless and to the extent converted
into shares of Common Stock in accordance with the terms hereof.
SECTION 8. If this Debenture is mutilated, lost, stolen or destroyed, the
Company and the Parent shall execute and deliver, in exchange and substitution
for and upon cancellation of the mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company and the Parent.
SECTION 9. No indebtedness of the Company or the Parent is senior to this
Debenture in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. The Company and the Parent will not and
will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits there from that is senior in
any respect to the obligations of the Company and the Parent under the
Debenture.
SECTION 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
conflicts of laws thereof. The Company, the Parent and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
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sitting in the City of Los Angeles, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waive, and agree not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Parent hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by sending a copy thereof to the Company and the Parent at the
address in effect for notices to them under this instrument and both the Company
and the Parent agree that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of a
Transaction Document, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.
SECTION 11. Any waiver by the Company, the Parent or the Holder of a
breach of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company, the Parent or the
Holder to insist upon strict adherence to any term of this Debenture on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company and the Parent covenant (to the extent that they may lawfully do so)
that they shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Company or the Parent from paying
all or any portion of the principal of or interest on the Debenture as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this indenture, and the
Company and the Parent (to the extent they may lawfully do so) hereby expressly
waive all benefits or advantage of any such law, and covenants that it will not,
by resort to any such law, hinder, delay or impeded the execution of any power
herein granted to the Holder, but will suffer and permit the execution of every
such as though no such law has been enacted.
SECTION 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
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SECTION 14. The payment obligations under this Debenture and the
obligations of the Company and the Parent to the Holder arising upon the
conversion of all or any of the Debenture in accordance with the provisions
hereof are secured pursuant to the Pledge Agreement (as defined in the Purchase
Agreement).
IN WITNESS WHEREOF, each of the Company and the Parent has caused this 6.5%
Secured Convertible Debenture to be duly executed by a duly authorized officer
as of the date first above indicated.
The Company The Parent
Presidion Solutions, Inc. MediaBus Networks, Inc.
By: /s/ James E. Baiers By: /s/ James E. Baiers
--------------------------- ---------------------------
Name: James E. Baiers Name: James E. Baiers
Title: Executive Vice President/ Title: Executive Vice President/
General Counsel General Counsel
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, $0.0000303 par value per share (the "Common Stock"), of MediaBus
Networks, Inc.. (the "Company") according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
----------------------------------------------------
Date to Effect Conversion
----------------------------------------------------
Principal Amount of Debentures to be Converted
Payment of Interest in Kind [ ] Yes
[ ] No
If yes, $__________ of Interest Accrued on
Account of Conversion
at Issue
----------------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------------
Applicable Conversion Price
----------------------------------------------------
Signature
----------------------------------------------------
Name
----------------------------------------------------
Address
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SCHEDULE 1
CONVERSION SCHEDULE
MEDIABUS NETWORKS, INC.
6.5% Secured Convertible Debenture due February __, 2004, in the aggregate
principal amount of $______________ issued by MEDIABUS NETWORKS, INC. This
Conversion Schedule reflects conversions made under Section 4(a)(i) of the above
referenced Debenture.
Dated:
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Aggregate
Principal Amount
Remaining
Subsequent to
Date of Conversion Conversion
(or for first entry, Amount of (or original Company
Original Issue Date) Conversion Prince Amount) Attest
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